The Ultimate Gift: Money and Know-How

Dec. 19, 2007 — -- Forget about the Wii. Never mind the plasma HD. And no, not another DVD.

As you approach the final week of holiday shopping with fresh ideas lacking, I say consider gifts that can make someone special richer down the road.

I'm talking books and education, software and subscriptions.

Stifle that groan, please. There are a number of personal finance-related gifts that demonstrate thought by the giver and might even trigger appreciation from the receiver.Here are just a few suggestions to consider as you finish off your gift-buying list:

Books

Making the Most of Your Money by Newsweek columnist Jane Bryant Quinn helped lead me to where I am today. I read the original edition shortly after its publication in 1991 when I was a young newlywed ignorant of financial affairs. More than anything else, this book is responsible for those financial decisions in life I got right.

At more than 1,000 pages, Making the Most of Your Money can be considered an owner's manual for the financial side of life that can be read in short bites. The book remains a source of timeless advice even though it was last updated 10 years ago and some tax-related information is outdated.Unconventional Success: A Fundamental Approach to Personal Investment by Yale University chief investment officer David F. Swensen is something every mutual fund investor needs to read. In this 2005 book, Swensen lays out the best argument I've read about why the average investor is better off investing in low-cost, passive investments like index funds and exchange traded funds.

Swensen also provides a lesson on the benefits of asset allocation in a manner accessible to an average reader.

The Intelligent Investor by Benjamin Graham should be read by anyone thinking of investing in individual stocks. A mentor to Warren Buffett, Graham established the foundation for "value investing" in this book and his more technical volume to include commentary by Money magazine columnist Jason Zweig.

Cost: $14 to $30.

Subscriptions

If you prefer something more sober, consider Consumer Reports Money Adviser.

For a news junkie, you might also wish to consider giving a gift to the Wall Street Journal, which devotes significant space to personal finance news and information.

Cost: $12 to $79.

Software

Buy the starter versions and suggest the recipients start simple with their everyday checking account to get the hang of it.

As they become comfortable, they can use the program to track investments, establish a budget and do tax planning.

Cost: $30.

Education savings

One advantage of a 529 account is that if the intended beneficiary does not attend college, then the funds can be transferred to an account for a sibling, cousin or other close relative.

For grandparents, a 529 savings account also is a great estate planning tool, allowing one person to make a gift of up to $60,000 to one individual in a single year. That is five times the usual limit without triggering gift tax considerations, but be aware gifts in excess of $12,000 will limit future gifts as the gift amount is prorated over five years.

Each state sponsors its own 529 plan, but you are free to invest in other states' plans. Factors to consider include whether your state offers tax incentives to invest in its own plan and investment costs associated with the plans.

For more information about 529 plans, check out www.collegesavings.org and www.savingforcollege.com.

Cost: $25 and up.

Now, go finish off that gift list.

This work is the opinion of the columnist and in no way reflects the opinion of ABC News.

David McPherson is founder and principal of Four Ponds Financial Planning (www.fourpondsfinancial.com) in Falmouth, Mass. He previously worked as a financial writer and editor for The Providence Journal in Rhode Island. He is a member of the Garrett Planning Network, whose members provide financial advice to clients on an hourly, as-needed basis. Contact McPherson at david@fourpondsfinancial.com